Pennsylvania income tax increase hinted

| Wednesday, May 27, 2009

HARRISBURG -- As Pennsylvania's predicted budget deficit crept to $3.2 billion, a top aide to a leading House Democrat on Tuesday raised the possibility of increasing the state income tax to tackle the problem.

Raising the state's 3.07 percent income tax by 1 percentage point would raise $3.1 billion, but it appears no politician is ready to formally propose that.

"Practically speaking, a small increase in the personal income tax would be the smartest way to resolve this crisis. Politically, it is the most difficult," said Johnna Pro, spokeswoman for House Appropriations Chairman Dwight Evans, a Philadelphia Democrat.

Any tax increase would have to augment cutting spending, instituting more efficient government operations and using a portion of the state's $750 million Rainy Day Fund and federal stimulus dollars, Pro said.

"The governor continues to believe that any increase in broad-based taxes should be the avenue of last resort given that even the modest, targeted revenue enhancements we've proposed have met stiff opposition in the Legislature," said Chuck Ardo, Gov. Ed Rendell's spokesman.

When asked whether Evans is ready to propose an income-tax increase, Pro said: "We're not there yet."

House Republicans began a boycott of legislative hearings they claimed Democrats and Rendell orchestrated to promote state spending and raise taxes.

"House Republicans will not participate in hearings to trump up reasons for a major tax increase," said House Minority Leader Sam Smith of Punxsutawney.

He charged that Appropriations Committee hearings last week and an Education Committee hearing Tuesday were staged by Democrats to demonstrate a need for higher spending.

The GOP salvo was a prelude to the battle that will wage until a budget is in place by June 30.

"The legislative Republicans' refusal to participate in further hearings, to hear opinions other than their own, is indicative of the challenge we face in crafting a responsible budget," Ardo said.

"Republicans were MIA (yesterday) ... and that's unfortunate," said Brett Marcy, a spokesman for House Democrats. He said an income tax increase is a "hypothetical that at the moment we are not prepared to discuss."

Rendell has proposed a $29 billion state spending plan. The Senate passed a $27.3 billion budget, a version crafted by Republicans that requires no tax hikes.

Rendell proposes taxing the extraction of natural gas and increasing the cigarette tax by 10 percent. He would tax smokeless tobacco for the first time.

Democrats decided budget hearings are needed for public input, Pro said, noting the Senate passed its budget with no public comment and based its plan solely on spending cuts. Evans believes "we simply cannot resolve the budget crisis by cutting spending," she said.

What Democrats should do is hold "tax hearings" to gauge the impact of state taxes on Pennsylvanians, Smith said.

"Tax hearings are not scheduled because the Democrats may not care about the impact," Smith said. "Every week, several state agencies have been putting out 'scare' press releases about programs they claim will end if the Senate's budget bill is enacted. ... Next we'll hear about the state police being unable to fuel their vehicles or purchase ammunition."

Shortly after Smith released his statement, the governor's office issued a press release saying the Senate budget cuts would "cripple" the state's tourism industry.

Rendell's public relations staff has churned out news releases almost daily about the impact of the Senate budget. On May 14, for example, the Department of Conservation and Natural Resources claimed the Senate budget would force the closure of 35 of 117 state parks and 1,000 miles of state forest roads. It did not name the parks.

Erik Arneson, spokesman for Senate Republicans, said no parks would need to close. He said even Rendell's budget proposed cutting that department's spending 4.5 percent.

Pro said the Senate budget was based on a revenue shortfall of $2.9 billion. That has grown to $3.2 billion, according to the House Appropriations Committee. "If we're correct and it goes to $3.2 billion, they're still $300 million off," she said.

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